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IN Supplements LIHEAP Through Mortgage Settlement Funds

March 21 -- Indiana will have about $4 million more annually to help low-income families pay their utility bills under legislation signed into law last week.

House Bill 1141 will use money from Indiana's share of a multi-state mortgage foreclosure settlement to boost funding for the state's LIHEAP. The money will be used to offset the 7 percent sales tax the state collects on utility bills paid for with LIHEAP funding.

Critics have said that LIHEAP could help more people if the state would exempt its participants from paying sales taxes on their utility bills, thus saving the program money. As passed by the House, the legislation would have created that exemption for one year. (The sales tax exemption was in effect in Indiana from 2006 to 2009, exempting energy purchased with LIHEAP funds from a 7 percent state sales tax, thus stretching LIHEAP funds further and saving recipients from $2.1 million to $6 million per year, according to Indiana LIHEAP leveraging reports.)

However, the Indiana Senate amended the legislation to add the settlement money instead. The bill now creates a fund to receive Indiana's share of a multi-state mortgage foreclosure settlement that was negotiated in part by Indiana's attorney general. Indiana expects to receive about $46 million from the settlement.

The bill would transfer some of that money — an amount based on the sales taxes charged to LIHEAP recipients (which varies depends on LIHEAP funding and the number of recipients) — back to the utility program to help more Hoosiers.

The Indiana Housing Authority, the LIHEAP grantee, will determine whether the new money will be used to help more families or give recipients larger benefits.

According to the nonpartisan Legislative Services Agency (LSA), the state will receive about $82.3 million for LIHEAP this year, down from more than $107 million last year. Only part of that funding is subject to the sales tax, LSA said.